Community Bank core deposit levels drop

It seems sensationalism is the norm for every news organization these days and the American Banker is no exception. This morning’s headline, “Bankers on high alert for liquidity risk as 3Q draws to close,” really caught my eye so I read the story over morning coffee.

The whole story is based on a drop in core deposits by three-tenths of one-percent. Call me skeptical, but -0.3% doesn’t really seem like that much of a change. Although to be fair we’re talking about nearly $32 Billion…if you put it that way I might be more captivated by the news.

In general, I’m very happy to have a publication like the American Banker because it focuses on bank news specifically. However, sometimes I feel like their stories are too big-bank focused and they either overlook or ignore the impact on community banks.

With this morning's story, I think they are really burying the lede. Yes, total core deposits have dropped. But what they don't tell you is that this appears to be a community bank phenomenon. ALL of the drop in core deposits from 1Q to 2Q has been for banks less than $10 Billion in total assets.

According to FDIC data, banks over $10 Billion have actually seen an increase of $4 Billion (+0.05%) in core deposits. I think the story that's much more in tune with the headline is the drop in core deposits seen by community banks. Data for all banks under $10 Billion in Total Assets shows core deposits dropping by $35.6 Billion or -1.62%. That seems a little more significant, especially for community banks.